China's enterprises are
investing in the corn deep processing market, backed up by subsidies of the
government. Corn deep processing is an effective way to reduce the large corn
stockpile that mostly contains low quality corn.
The
supply-demand situation for corn in China is still imbalanced in 2018, with a
surplus of supply. Furthermore, the market is even facing a continuing
decreasing planting area. While the country is still sitting on a huge corn
stockpile, domestic companies are investing in different downstream industries,
such as corn deep processing.
According
to CCM’s research, China is offering export subsidies for deeply processing
products. Especially in the northern part of China, subsidies for
deep-processing enterprises are being implemented.
To
be more precise, Chinese governmental officials revealed subsidies for feed and
corn deep processing enterprises in the country. Corn deep processing
enterprises, including corn starch and alcohol producers, that exceed a certain
processing capacity, as well as feed enterprises with a high annual output that
purchased corn and processed it before June 30, 2018, will get a special
subsidy per tonne of purchased and processed corn.
Jilin
Province, one of China’s major corn producing areas, took the lead to disclose
a subsidy for feed companies. Compared with last year, both Heilongjiang and
Jilin shortened the required corn purchasing period and decreased the
subsidies.
Meihua Holding new
project
Meihua
Bio is construction a new site capable of 3 million t/a corn processing.
Currently, the first stage of the project has started construction and will be
put into operation in October 2018. The project investment agreement was signed
by Meihua Bio with the People's Government of Baicheng, and the Management
Committee of Baicheng Industrial Park on August 10, 2018.
According
to CCM, the company is investing a total amount of USD1.59 billion. In the
first stage, cornstarch sugar equipment, lysine equipment and compound
fertiliser equipment will go into operation. For the second stage,
additionally, corn starch sugar equipment, monosodium glutamate
equipment and more compound fertilizer equipment is being built. The
third stage will include corn starch sugar equipment and functional sugar
equipment.
China’s corn deep
processing industry
After
10 years of restrictions, China’s government is opening the access of foreign
investments into the corn deep processing industry again. The government is
aiming to enhance the economy with this step and also hopes to improve the
effective way to reduce the huge corn storage.
China’s
corn deep processing industry actually has the longest processing chain in all
food crops processing. After all, up to 2,000 downstream products can be
created from processing corn. The corn deep processing industry has segments in
the food business, medical, daily supplies, fuel, and more.
According
to CCM, the Catalogue for the Guidance of Foreign-Invested Industries was
amended in 2017 and finally will into effect on July 28. The amended version
has cancelled all restrictions of foreign investments into the corn deep
processing and fuel ethanol industry, which means domestic and foreign
investors can equally invest in the industry and mergers and acquisitions
between enterprises are easier.
The
restriction for foreign investment was established in 2007 as a response to the
limited corn supply which was needed for the food and feed industry rather than
used in the corn deep processing industry. The result of the restriction was
that less than 26% of corn was able to be used in deep processing. Despite the
restriction of foreign investments, also new projects for deep processing were
supervised more closely and needed approval.
The
biggest change will occur in the domestic competition, as foreign enterprises
are generally enjoying better-funded companies, stronger research and
development abilities as well as higher talent in human resources. As a result,
the industry in China will likely concentrate more and the technology will be
improved faster.
The
corn supply for China’s corn deep processing industry was tight in the last
years. In order to feed the increasing population in China and guarantee corn
supply for food and feed, some corn deep processing products were restricted by
the government. Inefficient corn starch production lines even have been
required to be eliminated. For example, the 2011 edition of the Guideline
Catalogue for Industrial Restructuring stipulated that the construction of corn
starch production lines with capacity under 300,000t/a shall be
restricted.
About the article
The
information for this article comes from CCM, China’s leading market
intelligence provider for the fields of agriculture, chemicals, food and feed.
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